Citizens bill moves toward Senate floor

A sweeping property insurance reform package rolled through its final Senate committee Wednesday with unanimous support — and no debate on controversial provisions that would increase rates for Citizens Property Insurance customers.

Lawmakers did not discuss language in the bill that would boost state-run Citizens’ cap on annual rate increases from 10 to 13 percent and charge new Citizens customers significantly higher rates.

Instead, both Republicans and Democrats praised bill sponsor Sen. David Simmons, R-Altamonte Springs, for his work on the controversial issue. The bill cleared the Senate Appropriations Committee 16-0 and now goes to the Senate floor.

Simmons noted he made numerous concessions in the legislation to lawmakers concerned about rate increases and plans to further amend the bill to make it more consumer friendly.

“We have a rational solution that is a product of compromise,” Simmons said.

But the legislation could result in big changes for consumers. State leaders, egged on by private insurance companies, are looking to halt the growth of Citizens by making it the most expensive insurer on the market for new customers. Existing customers of Florida’s largest insurance company also would find it more difficult to stay with the state-run insurer.

The legislation’s broad support Wednesday indicates it could be on track to clear the Senate, a legislative body where controversial insurance bills have stumbled in the past.

The bill still has detractors among lawmakers with significant numbers of Citizens policyholders in their districts. Some senators have expressed concerns about rate shock. There are 90,000 Citizens policies in Sarasota and Manatee counties.

Simmons tried to address some of those questions by agreeing to take out a provision in the bill that would apply Citizens’ rate cap by territory instead of by individual policy, a move that would have paved the way for much larger rate increases for individual homeowners.

The bill sponsor also pledged to maintain a provision in state law that requires private insurers to hold a public hearing if they propose rate increases of greater than 15 percent. The legislation removes the hearing requirement, but Simmons said he plans to amend the bill on the Senate floor to restore the hearings and the individual rate cap.

Sen. Joe Negron, R-Stuart, said he had concerns about homeowners not having input on rate increases.

“I don’t want to do anything that’s going to diminish the right of the public to be heard,” Negron said, adding: “I’d rather err on the side of having too many hearings than too few.”

There was little other criticism of the legislation, despite its potential for far-reaching impacts.

Lawmakers hardly broached the issue of rate increases. Simmons acknowledged after the hearing that the bill allows Citizens to boost rates beyond what is currently allowed, but insisted the measure would strengthen the private insurance market, increase competition, and ultimately reduce rates.

Yet one of the main reasons private insurers want to boost rates at Citizens is so they can raise rates without worrying about competition from the state-run company. Insurers have steadily and substantially increased rates despite seven years without a hurricane making landfall in Florida.

Among the provisions in the bill:

— Rates for new Citizens customers would have to be “actuarially sound... and not compete with the private market. A non-competitive rate is defined as the highest rate among the top 20 insurers writing in a given territory.”

— Citizens’ cap on annual rate increases for existing customers would go from 10 percent to 13 percent to help pay for hurricane reinsurance coverage.

— The maximum home value covered by Citizens would be reduced by $100,000 annually and eventually be capped at $500,000.

— Citizens could take money from reserves and loan it to private insurers who agree to take policies out of the state-run company.

— The state would develop a “clearinghouse” program that would force insurance agents to aggressively shop policies around in the private market before placing a homeowner in Citizens.

Lawmakers pushing to shrink Citizens have described the company as a huge financial liability for Floridians because it can levy assessments on most insurance policies throughout the state to pay claims if the insurer runs short of cash after a major hurricane.

They do not emphasize that assessments also are levied to pay claims when private insurers go bust — or that, with nearly $6 billion in reserves, Citizens is in better shape than many private companies, able to withstand all but the most catastrophic storm without resorting to hurricane assessments.

That did not stop lawmakers from describing the issue in apocalyptic terms Wednesday.

“You can be assured that the day of reckoning is going to come,” Simmons said.

Last modified: April 4, 2013
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